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Economy: Enterprise, Taxation and Manufacturing

My Lords, as I mentioned in my maiden speech in your Lordships' House, when I came to this country in the early 1980s as a 19 year-old from India, from my higher education, Britain was the sick man of Europe with no respect in the world economy. The City of London, where I worked and trained to qualify as a chartered accountant, was a closed shop. What has happened to transform the Britain of a quarter of a century ago into the Britain of today? I believe that three fundamental factors have enabled that transformation. First, we are today one of the most open and free markets in the world. Without the ““big bang”” and the opening up of the City of London in 1986, there is no way that the City of London would today be the pre-eminent global financial centre of the world. This openness has also made the British economy one of the most attractive destinations for foreign investment. Without this openness, there is no way that I, as a 27 year-old with £20,000 in student debt to pay off, would have been able to start a beer brand from scratch in the most competitive beer market in the world. And the competition means that the biggest beneficiary in any sector is the consumer, who is in the driving seat demanding more variety, more choice and better quality. The bar is continually being raised. The second factor is that in the Britain I came to just over 25 years ago, the word ““entrepreneurship”” conjured up images of Del Boy. In the Cambridge University that I attended in the late 1980s, the words ““business”” and ““entrepreneurship”” did not exist in its vocabulary. Today, I am proud to say that Cambridge has the Judge Business School, which this year was ranked as one of the top 10 business schools in the world. Today, we encourage entrepreneurship throughout all universities in this country. I am proud to be the national champion for the National Council for Graduate Entrepreneurship set up by the Prime Minister, when he was Chancellor, spreading the spirit of enterprise and entrepreneurship through every university in this country. The third factor is taxation. There is no question about it—where business is concerned, high taxes are stifling. I am grateful to the noble Lord, Lord MacLaurin, for calling this debate to address these crucial issues. So what is the role of government with regard to business? Many would say that the best role for government is to get out of the way and to let business get on with it. But I believe that government, regardless of political party, has played a very important role in the transformation of Britain over this past quarter of a century. Government can be a helper, supporter and a catalyst for business. Most importantly, government can create the environment in which business can flourish. I will give one example from my experience: that is the Government’s small firms loan guarantee scheme, of which we have been a beneficiary. They guaranteed 75 to 85 per cent of the loans that we raised. I remember that, in 1993, one of these loans saved me from having to give away 25 per cent of my company to a venture capitalist. That enabled me to save the equity of the company, so that everyone in my company now has access to a share option scheme. Having started £20,000 in debt, I still own the majority of my company. This is an example of how government can be a supporter of, and enabler to, business. I am delighted to hear the Prime Minister say in a recent speech that this scheme will be expanded. I urge the Minister to expand it in a big way. Coming back down to earth, we have a situation today where, over the past 12 months, the Government, which had done so much until then to help business, have removed taper relief, which reduced capital gains tax to just 10 per cent, encouraged investment and was aimed primarily at entrepreneurs and entrepreneurship. They have removed the lowest 10p rate of tax, affecting 5.3 million individuals and families. The Chancellor, in the last Budget, reduced corporation tax for large companies, yet increased corporation tax for small companies. Then we had Northern Rock, which clearly demonstrated a lack of clarity, accountability, responsibility and communication between the triumvirate of the Treasury, the FSA and the Bank of England. The happy merry-go-round in what the Governor of the Bank of England called ““a nice decade”” became a miserable blame-go-round. The Government had to inject £25 billion to rescue Northern Rock and then had to nationalise it. I do not think that we in this nation, or the world, have grasped the magnitude of a company being rescued to the tune of £25 billion—more than has ever been spent to save any company on this planet. We had the charge being imposed on non-domiciled individuals, threatening the openness of our economy and alienating many key individuals who have invested so much and brought so much talent to this country. More recently, we had the furore over the taxation of UK companies’ overseas activities. I am sorry to say that, with all these changes, the Government have, without consultation and often without having thought through these changes, alienated and upset virtually every part of the business community in this country. There is talk of simplifying taxes, yet the tax burden in this country has continually and steadily increased. Companies are moving, and talking about moving, their headquarters to countries such as Switzerland and Ireland, which has a 12.5 per cent rate of corporation tax. In a snap poll by the Federation of Small Businesses two months ago, 93 per cent of small business owners said that their confidence in the Government had decreased since last year. Britain’s manufacturing industry is still responsible for one-sixth of the UK’s output. It accounts for more than half of UK exports and undertakes 75 per cent of all business research and development. It employs 3.5 million people, and many more indirectly through the supply chain. I am very proud of British manufacturing—the cutting edge, high-value-added manufacturing of companies such as Rolls-Royce. Sir John Rose, in an FT article earlier this year, said: "““Having a mixed economy in which both manufacturing and services are important gives a stronger base””." I give a quick example from my own company. Until this month, we produced more than two-thirds of our European production of Cobra in Poland. It was cheaper and more efficient to produce it in Poland, even after paying the distribution costs to bring it into the UK. However, now we have found a ground-breaking and innovative manufacturing model and we are moving our production back to three breweries in the UK; bottling and packaging in an integrated manufacturing, bottling and distribution plant, created and built with Irish inward investment near Manchester. This will save us several million pounds from day one. Who said British manufacturing was dead? As an enterprise leader for the Prince’s Trust, I was delighted last week to hear the Minister announce that the Government will support the Prince’s Trust business programme, which celebrates its 25th anniversary this year. The Prince’s Trust has done a marvellous job in helping 70,000 businesses, not only through providing loans, but also through its fantastic mentoring scheme. The Minister said that the Government would contribute £1 million to support the Prince’s Trust. The Prince of Wales then took the podium and said that he was delighted that in the audience was the noble Lord, Lord Young of Graffham, who, in 1988, when he was Secretary of State for Trade and Industry, supported the Prince’s Trust and, to celebrate the prince’s 40th birthday, said that, ““For every pound you raise, we will match it””. The Prince’s Trust, even in that dreadful economic climate, raised £27 million and, reputedly, the Government matched it with £27 million. Is it the case that the Government are giving £1 million in support this year, versus £27 million in 1988? They are giving £25 billion to rescue Northern Rock to maintain financial stability. If only we could support small businesses the same way in which the American small business service has done for decades, with tens of billons of pounds of support; imagine what we could do with entrepreneurship, enterprise, manufacturing and innovation in this country. Imagine where we could be. Something dawned on me when I opened the fourth Joint Economic and Trade Committee meeting in my role as UK chairman of the Indo-British Partnership and the chairman of the UK India Business Council. I welcomed the Indian Minister for Commerce and Industry to his fourth meeting in a row, and I welcomed our Secretary of State for business to his first meeting. He was our fourth Secretary of State in four years. Are the Government taking business seriously? The Secretary of State for business should be one of the great offices of state, but unfortunately it is not. In my role as chairman of the UK India Business Council, I have seen how far £1 million of support can go. The support that we get from UK Trade and Investment genuinely allows us to promote trade, business and investment bilaterally. Britain is still one of the sixth largest economies in the world. We have only 60 million people—we are a tiny nation in comparison with the giants of China and India—and yet one in five school-leavers is still unable to read and write properly and, despite our enormous wealth and in spite of us being able to provide free education, free health, roofs over our citizens’ heads and a safety net of welfare, we still have child poverty and huge areas of deprivation. We have much to do. It is fundamental that, particularly in the current economic climate, the Government put business first, because, as my friend, the noble Lord, Lord Jones, constantly reminds us, it is business that creates the profits and the jobs that pay the taxes that provide the public services. Actually, business is at the heart of it all. Goldman Sachs predicts that in 2050 China and India will be the largest two economies in the world but that Britain will still be one of the 10 largest economies in the world. We have always punched above our weight and we have always been adaptive, flexible, creative and innovative. By putting business first, we will always keep the ““great”” in Great Britain.